Auto Industry Bailout Gap: USA Leads

[Perknose]

NYT Sub Link:

China?s car industry is quietly pressing Beijing for government help as it copes with a jarring slowdown, top Chinese auto executives said in interviews here on Tuesday.

This autumn, after six years of 20 percent or more annual growth, vehicle sales were flat or slightly negative, a shock to an industry that has borrowed heavily to build ever more factories for a market that had once seemed insatiable.

Citing the $25 billion in loans that Congress has already approved to help American automakers increase green research, and the additional $25 billion in loans the American industry is seeking this week to cope with a hobbled economy, Chinese executives are now telling the government here that they need emergency measures too. They are seeking lower taxes on new cars, lower fuel prices and increased grants for research into hybrid cars and new technology.

?The Chinese government will undoubtedly support us,? said She Cairong, the general manager of JAC Motors, adding that state-owned Chinese banks had already become more willing to lend money to Chinese automakers in recent weeks as bank regulators have eased restrictions on loans to heavy industry.

Still, Mr. She and other industry leaders said that while government officials have voiced concern to them about the industry?s deteriorating condition, Beijing has not committed to any specific help.

[^^^ That's what She said. ]

?They?re asking the questions but they haven?t said anything yet? on how aid might be structured, said Frank Zhao, the vice president and chief technology officer of Geely Automobile Holdings. ?We really hope the Chinese government will come and help us.?

Michael Dunne, the managing director for China at J.D. Power, said in a telephone interview from Shanghai that the executives? remarks here marked a shift in the position of the Chinese auto industry.

?This is the first I?ve heard of it,? he said, while adding that ?as the market slows down, Chinese automakers are going to face competition as they never have before.?

Lots across China became increasingly crowded with unsold cars as sales were slightly lower in August and September than a year earlier. Yet manufacturers unexpectedly increased their shipments of new vehicles to dealerships last month by 10 percent compared with a year earlier, seeking to keep new factories busy and avoid layoffs.

Retail sales figures for October are due this week, and are likely to show a further decline that could set off another round of price cuts in a market where discounting is already becoming increasingly common.

Detroit has repeatedly found that raising production in the face of weak retail sales is a recipe for financial trouble, and there is little reason to think that will be different in China.

The Chinese auto industry faces several threats simultaneously. Weakening economic growth, falling real estate prices and a yearlong plunge in the stock market have made consumers leery of spending money. Fuel prices in China are still high despite the recent decline in world oil prices. And Chinese auto exports, mostly to developing countries in Eastern Europe, Southeast Asia, Africa and Latin America, are starting to crumble.

China?s car industry is already bigger than Japan?s, and is approaching in sales the industries of the United States and all of Europe. China is on track to sell 10 million vehicles this year, while demand in the United States is dropping toward 14 million vehicles.

Automobiles have played a central role in Beijing?s recent plans to move up the manufacturing chain, from making cheap goods that require unskilled or low-skilled workers to more advanced products.

To that end, the Chinese government has provided considerable help to China?s nascent auto industry with research and development spending, as well as loans from state-owned banks.

But there is some disagreement within the Chinese auto industry now about how the government can be most helpful.

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As (barely) former Socialist/Communist Devils, you'd think China would have been out in front of this whole government bail-out of the auto industry thing, but Nooooooooo!

It's just nice to know our country still has the lead in this important area. :thumbsup:

 

[Thump553]

I cited an article in one of the US bailout threads last week where GM was still actively seeking to expand it's interest in a Chinese autobuilding company while at the same time seeking bailout cash here. So it looks like GM management still doesn't know what in the world they are doing-unless this was some deal like the proposed Chrysler merger-merge all the failing auto companies into one huge worldwide megacompany.